Cash-strapped Crozer Health turns to Temple and Jefferson for help maintaining services

Crozer-Chester Medical Center, struggling to pay its bills, is searching for outside medical partners to keep providing vital care services.

Since Oct. 1, Temple has been sending a cardiothoracic surgeon to the hospital that has the only trauma center in Delaware County.

The move to an outside specialist followed the abrupt closure of Crozer-Chester’s kidney transplant program in January, earning Crozer a state health department citation for not giving the required 60-day notice.

Now Crozer is seeking an agreement with Jefferson Health for trauma and neurosurgical services starting next year. Jefferson officials, who confirmed the discussions, were scheduled to visit Crozer operating rooms and intensive care rooms on Tuesday.

These changes show a health system in distress under owner Prospect Medical Holdings Inc. of Los Angeles. In recent months, Crozer has put vendors of surgical supplies and many services on payment plans because it can’t pay bills in full.

Crozer-Chester received more visits from state health inspectors from January through early October than any other hospital in Southeastern Pennsylvania, and Inquirer analysis found. In one case, biohazard waste bags piled up on the loading dock.

The turmoil echoes reports of similar issues at other Prospect hospitals in Connecticut and Rhode Island.

For critics of private equity in health care, what has happened at Crozer Keystone Health system since Prospect’s 2016 private-equity acquisition is an example of the damage that such investors can do to health care institutions. Investors loaded the Prospect hospitals with debt, then paid themselves hundreds of millions of dollars in dividends.

Prospect last year closed emergency departments and acute-care services at two of Crozer’s hospitals, Delaware County Memorial and Springfield, and has significantly reduced the number of beds in use at Crozer-Chester in Upland, and at Taylor Hospital in Ridley Park.

Now the Prospect era in Delaware County may be nearing its end.

Prospect reached an agreement last month with state and local officials designed to give Prospect nine months to sell Crozer. The Foundation for Delaware County and the Pennsylvania Office of Attorney General agreed to pause litigation over the closure of Delaware County Memorial, an arrangement that a judge must still approve.

Prospect’s troubles are even more visible in Connecticut and Rhode Island, where health-care transactions are more regulated, giving the public more insight into their financial operations than in Pennsylvania.

In Connecticut, the proposed sale of three Prospect hospitals to Yale New Haven Health for $435 million has stalled as Yale New Haven seeks a price cut, given the hospitals’ financial deterioration since the deal was reach in October 2022. Yale New Haven is also pushing the state for $80 million in aid over five years.

The Connecticut attorney general is investigating Prospect’s financial practices, according to CT Insider, but no specifics were available.

On Nov. 9, the Rhode Island Department of Health ordered Prospect to hire independent fiscal and operations monitors at Roger Williams Medical Center and Our Lady of Fatima Hospital “to ensure the continuity of health services and care at the facilities by acting immediately to stabilize the two facilities financially.”

The health department said at least 19 elective surgeries were canceled in October, because equipment and supplies were not available due to Prospect not paying vendors.

Separately, the Rhode Island attorney general sued Prospect for violating terms of a 2021 agreement that allowed Prospect owners Sam Lee and David Topper to buy out their private equity partner’s 60% stake in Prospect for $12 million. Among other things, Prospect was supposed to pay vendors on time.

At the Rhode Island hospitals, the amount overdue more than 90 days soared to $24 million on Oct. 31 from $11 million at the end of March, according to the Rhode Island attorney general’s lawsuit.

During the early years of Prospect ownership, Crozer-Chester grew admissions to 20,038 in 2018 from 18,598 in 2016.

By last year, however, admissions at Crozer-Chester had slid all way down to 13,684, according to state data. This includes the numbers at Springfield and Taylor Hospitals, which are covered under the same license.

Prospect also borrowed $1.12 billion in 2018 to pay off debt and issue a $457 million dividend to its owners, Leonard Green & Partners, as well as to Lee and Topper.

Then Lee and Topper put Prospect into an even deeper financial hole the next year with the $1.4 billion sale of most of the company’s real estate to an Alabama real estate investment firm, Medical Properties Trust Inc. (MPT). The terms, described as a sale-lease-back, required Prospect to pay rent on buildings it used to own.

The deal valued Crozer’s properties at $420 million and required $35 million in annual rent.

MPT now values the Crozer properties at $155 million — about a third of what it paid.

Early last year, it seemed a solution had been found for Crozer. ChristianaCare, Delaware’s largest health system, had a preliminary agreement to acquire Crozer, returning the health system to nonprofit status, but those talks ended last August.

A month later, Crozer announced that it planned to close Delaware County Memorial Hospital in Drexel Hill as an acute care facility and use it for inpatient drug treatment and psychiatric care.

The Foundation for Delaware County sued, representing the interests of the former nonprofit owner of the Crozer-Keystone Health System. The foundation said Prospect’s purchase agreement required it to get the foundation’s consent before closing any of the hospitals it acquired. That provision is in effect until July 1, 2026.

The state attorney general supported the lawsuit, but acute care services and the emergency department at Delaware County Memorial still closed a year ago because the facility did not have enough staff.

If the judge overseeing the foundation’s lawsuit approves the pause, Prospect is expected to resume seeking bids for Crozer as soon as next month.